Antecedents of New Entrant's Product Scope Strategy: Evidence from the U.S. Hospital Industry

Abstract

A firm's product scope strategy within its industry is one of the most fundamental concepts in strategic management and entrepreneurship and is particularly important for new entrants. Although the extant literature has focused on the performance implications of firms' product scope positioning (e.g. focus strategy), we still know little about how firms choose their product scope strategy in the first place. We address this important gap by examining the antecedents of new entrants’ product scope strategies. We argue that a new entrant’s product scope strategy depends on internal firm characteristics, such as pre-entry history (or the lack thereof) and the firm's profit orientation, along with the external market environment. Using the U.S. hospital industry as our empirical setting, we find strong support for our hypotheses.

Keywords: New entrant, product scope strategy, focus, hospital industry, entrepreneurship